Question

The original cost of a machine was $50,000. This machine can be sold for $25,000 now, and its estimated market value decreases by $5,000 keeping one more year. The modification cost to use the machine now is $5,000, and the maintaining cost of the machine is $5,000 in the first year increasing by $1,000 next four years. Minimum expected return is set to 10%. How much would be your annual saving if you hold this machine only two years instead of five years? O a) Between $600 and $800 Ob) Between $200 and $400 O c) Between $800 and $1,000 O d) None of the answers are correct O e) Between $400 and $600

Answer 1

Given,

The original cost of machine $50000.

Machine can sold for $25000.

Market value decrease by $5000.

Modifying cost of machine $5000.

Mataince of cost $5000.

First year increasing cost $1000 nest four year.

Return is set 10%

To find:

How much annual saving?

Solution:

None of the answer is correct in above question.

Hence the total cost of operating the machine is higher than the cost of sale Machine at the end of each year.

So the no saving of the equipment.